U S Economy


U S Economy Essay, Research Paper

Economics Paper


How easy is it for smaller business men to achieve the Aamerican dream. How to stop corporate domination. The question I pose to you is ” Is the American Dream still achievable?” The opportunity is there but for what select few is the opportunity available to. If the resources are out there but I can’t tap into the resources they rae of no use to me. (Make note of the fact that we live in a market economy.


Just about every definition of the “market” in the dictionary connotes an oppurtunity as a place where goods are bought and sold.(cite dict.) As an abstraction, a market is the possibility of sale. Goods “find a market”, and we say there is is a market for a service or commodity when there is a demand for it, which means it can and will be sold. Markets are opened to those who want to sell and a convenience for those looking to purchase.(cite 2) The market represents “conditions as regards, opportunity for, buying and selling”.(cite 2) The market implies offering and choice. The way a market economy works is that there are market pressures that develop for different commodities. The pressures work in one direction for a while, but at the same time pressures are budding that work in the opposite direction. As people look forward and see there’s going to be some profit made from their production, they’ll make decisions to increase volume, usually hiring more people, buying more materials, often bidding up their prices. When people are competing in the same market, that tends to generate more and more pressure in the direction of expansion. But at the same time, as costs and possibly interest rates rise, pressures begin to operate in the other direction, against profits.(cite 1) The public as a whole must get their fair share of the benefits. Macroeconomic reforms should translate into a more efficient delivery of public services, equity, social welfare and social security.(cite 3)

The Economic Policy Institute (EPI) has released its findings on American living standards. The report, issued every other year on a decline that begsn in the late-1970’s. The EPI’s report also contends that the Americans are working more for less money because of slow growth in wages since 1989. According to the report, wages in the bottom 80% of men have declined since 1989. The report also contends that 20% of women have experienced a decline in trsl esgrd dincr the 1980’s, a period in which wages fell but family income increased because of longer hours at work and increased participation of women in the workforce. Critics assert that the report wrongly focuses on declining wages as a gauge to the income of the American family. Such critics find spending a more appropriate means by which to measure income.(cite 4) One proposal would birng back the 10% income deduction for second earners that was eliminated in the Tax Reform Act of 1986.(cite 5) Under that rule, a couple with two earners can deduct from taxable income 10 percent of the earnings of the spouse with the lower earnings(generally, the wife) up to 30,000 of earnings.(cite 5) Since almost all married working women earn less than 30,000, this is equivalent to a 10 percent reduction in the wife’s marginal tax rate.(cite 5) To get a sense of how substansial this offset would be, consider a typical middle-class two earner couple. The husband earns 45,000 per year, and the wife earns $15,000 per year by working 1,000 hours at $15 per hour. They pay tax at a marginal income tax rate of 28 percent plus a payroll tax of 7.65 percent.(cite 5) They also pay at a typical state income tax rate of 5 percent.(cite 5) As a result, the wife’s $15 per hour wage produces only a net of $8.90 per hour.(cite 5) If she didn’t change her work, the deduction would reduce her taxable earnings from $15,000 to $13,500.(cite 5) With a marginal income tac rate of 28 percent, that would cut her tax payments by 420 per year.(cite 5) That’s how the current method of revenue estimation would evaluate the revenue effect of the deduction, a $420 revenue loss. But the 10 percent cut in her effective marginal income tax rate (which would result from deducting 10 percent of her earnings from taxable income) would raise her net hourly take-home by a little less than 5 percent, from $8.90 per hour to $9.32 per hour.(cite 5) Statistical studies of the labor supply of married women imply that a 5 percent increse in their net wages would increase the average hours worked by about 2 percent. In the current example, the wife would increase her work from 1,000 hours per year to 1,020 hours. The extra hours would raise her pretax earnings by $300. She would pay an additional $46 in Social Security payroll taxes.(cite 5) The tax payments reduce the revenue cost from the “static” $420 to $298.(cite 5) In addition to increasing the average number of hours worked by married working women, the lower marginal tax rate for married women would also encourage more married women to work. That increase in their labor force participation rate would mean more revenue to the Treasury.(cite 5)

More has to be done in our economy to ensure that all business owners have an equal opportunity to be chosen for gavernment contracts. Investigators have suggested that government contracts are awarded to insider’s companies instead of other, better qualified applicants. Therefore calling for a review of the application procedure due to the favortism shown to those with inside contacts and extensive legal support.(cite 6)

The United States Treasury announced its plan to issue a new kind of Government bond that would protect the average investors from inflation while helpng the Government finance the national debt. The new bonds will offer returns that fluxuate in relation to inflation. They will be backed by the Government and priced so unexpected inflation will not erode their value. The new bonds are a way for the Government to tap into the $675 billion 401(k) market.(cite 7) The Congressional Budget Office says Clinton’s 5-year budget package cuts any addition to the federal debt by $433 billion by 1998.(cite 9) The deficit reduction estimates for fiscal 1994 vary from $102 billion from the Whitehouse to the Congressional Budget Office figure of $83 billion provided in deficit reduction in the Fiscal year 1994.(cite 9) A number of factors have helped including the growing economy with low interest rates and inflation which has reduced the annual deficit by cutting interest cost on the ferderal debt. The econommy has also helped by reducing the boosts to indexed Social Security, boosting revenues, and by cutting the costs projected for the savings and loan bailout.(cite 9) This report is backed up by more recent findings by the Treasury department that the Federal budget deficit fell in the fiscal year ending in Sept. 1995, due to the fact that revenue rose more than spending.(cite 8) The deficit was $163.81 billion. This is down from $203.1 billion in Fiscal 1994. The deficit is the smallest it has been since 1989. Revenues for Fiscal 1995 rose to $1.351 trillion, up from $1.257 trillion in Fiscal 1994, while outlays rose to $1.514 trillion, up from $1.461 trillion in Fiscal 1994.(cite 8)

Another sign of economic progress is the more recent rise of the Dow Jones. The New York based company began in 1881 as Charles Henry Dow and his partner Edward Jones invented a way of measuring the industrial average by which investors could make their money. The first index was created on May 26,1896, based on 12 smokestack firms, with the indicator closing at 40.94. After the crash of 1929, the World War II pushed the index up to 192.91 in 1945, with the index reaching the 5,000 mark on November 21, 1995. A record high of 5,778 was recorded on May 22. 1996, rising 13% in the first half on 1996.(cite 10).

Macroeconomists between the early 1980’s and early 1990’s have tried to develop a new kind of model that can be applied to policymaking. This type of model could help determine policies related to deficit reduction. This rational expectation approach offers an alternative to the Keynesian approach, but more research in areas such as forecasting and credibilty is needed. New Keynesian models and real business cycle models have evolved from the rational expectaions model.(cite 13) The lack of representation of macroeconomists among Nobel Prize winners since 1987 reflects the disorganized state of macroeconomics. Macroeconomists have focused more on mathematical theories than real world applications, and they have been unable to explain fluctuations in the business cycle.(cite 12)The most popular theory for economic growth seems to be a change in the approach and interpretation of our economy. Th reason for this seems to be the fact that the problem with today’s economy stems from the economist.(cite ) A common thread unites the research on the politics of macroeconomic policy, policy substitutability, the use of different policy instruments to affect the same goal is implicitly denied. Yet, economic theory indicates that policymakers have multiple policy instruments at their disposal that can be used alternately or in some combination to manipulate their economies.(cite 11) Another problem is that elite economists, including Nobel Prize and John Bates Clark medal winners, have had their papers rejected by journals for reasons ranging from excessive mathematical analysis to using sexist language.(cite 13) Some of the rejected papers have later been hailed as classics and accepted by other journals. We as a society need to give these theories a better look in hopes of finding a better path to economic growth.


What is possible today may not be possible tommorrow in our economy because it is forever changing and with that change comes comes unexpected profit and loss that can’t be predicted. The fate of the American economy is virtually impossible to predict but by using past examples we can attempt to find ways to stir up economic growth and find a path to economic stability. (The truth is that in our society we can never really say that you can no longer achieve the American Dream because our economy is forever changing and as long as that holds true their is hope)

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